1. Field of Invention
The present invention relates generally to the field of computer-based retirement plan tracking and accounting. More specifically, the present invention is related to a computer-based application of a modified 401(k) retirement plan.
2. Discussion of Prior Art
Retirement plans, such as 401(k) plans, comprise a labyrinth of complex rules, accounting procedures, investment options, testing and reporting schemes and, as such, have heretofore been unmanageable to the average person or small business. Because of the above cited complexities, the normal course of action is to retain the services of a professional retirement administrator to setup, operate, test and otherwise supervise the overall retirement plan established for a group of individual employees.
Internal Revenue Code section 401(k) was devised to encourage workers to set aside money for their retirement years by allowing them to defer paying taxes on "retirement money" until retirement, at which time they would likely be in a lower tax bracket and, therefore, pay less total tax on the dollars.
Because 401(k) dollars aren't to sit idle while awaiting withdrawal (such would hardly make individual or national economic sense), an entire industry has formed around helping companies set up their 401(k) plans--and helping participants invest the dollars they defer into them.
Every 401(k) plan requires knowledgeable monitoring to ensure it stays in compliance with IRS regulations. Plans that include many services (loans, hardship withdrawals, automatic IRA rollovers upon distribution, etc.) and that allow a wide selection of investment opportunities can become very complex; their providers (often "third party administrators") charge accordingly. It's a fee that puts the 401(k) out of reach of many businesses. Providers of these plans also commonly assess a fee based on the number of employees eligible to participate in the plan (regardless of the number that actually do participate), and they often require a certain minimum level of actual participation--to ensure a minimum pool of investment dollars which will be earning the administrator fees and, possibly, brokerage commissions. Coming up with the base-fee capital, plus being able to meet the high eligible-employee and participation standards imposed by providers, effectively eliminates most small businesses from setting up a 401(k) plan.
The tremendous population not served by full-service, highly-customized 401(k) plans inspired some providers to create the "turnkey" plan. Turnkey plans are prefabricated and ready-to-use 401(k)s, with IRS-mandated documents, administration and investment options bundled together into one integrated package; participants' assets are pooled to create the commissionearning investment minimum desired by the providers. The plans are designed to be simple, easy-to-use and relatively low-cost--to both provider and end-user. Most insurance companies, mutual fund companies, and brokerage houses offer versions of the turnkey plan.
Unfortunately, the simplicity sought in the turnkey has also made it inflexible, presenting many clients with problems over time. For example, the bundled turnkey offered through a mutual fund company, or brokerage firm, makes it virtually impossible for an employer to change from the in-house investment selection-administration pairing chosen at the plan's outset. Another drawback is that many brokers and agents involved with 401(k) plans use the 401(k) as a vehicle for soliciting their clients' employees with additional investment products.
Offering unlimited access to virtually all SEC-regulated investment options--with no restrictions on the number of mutual fund families or their investments that a company can choose for its plan--is a far cry from the practices of typical "turnkey" products, such as those offered by mutual fund companies and insurance companies. In most turnkeys, the host company bundles a few proprietary investments with its in-house 401(k) administration; the result has been inflexible, relatively costly, and investment-sparse plans limited in their suitability to a wide range of participants--and greatly inhibiting to an employer having to change investment or administrative providers.
Conventional 401(k) plans fail to provide the flexibility to track individual investor accounts separately. Individual tracking enables unlimited new employee additions, unlimited investment options and tracking thereof, without modification of the remaining member accounts. The prior art has failed to provide for an end-user computer-based system allowing individualized accountability. Examples of existing prior art are described below.
The patent to Valentino (U.S. Pat. No. 4,648,037) provides for a method and apparatus of a communication system for enabling an employee to access information by a terminal concerning their up-to-date savings plans and the values thereof, withdrawal information, explanations of provisions, employee benefit information (e.g., group life insurance, disability coverage, vested retirement, etc.), explanations of savings plan and benefit options, and benefit news bulletins.
The patent to Halley et al. (U.S. Pat. No. 4,750,121) provides for an improved pension benefits system for enrolled employees of subscriber employers including a master trust institution and a life insurer institution. The master trust institution computes and receives each subscriber employer's periodic payment therein to based primarily upon that employer's number of current employees, their ages and monthly earnings; purchases and retains a life insurance policy from the life insurance institution covering each enrolled employee; invests in available securities to generate interest income; provides specific accurate future projections of periodic benefits for retirement, death, or disability; receives all life insurance policy proceeds upon the death of each enrolled employee; and distributes all periodic payable benefits. Funding a significant portion of payable periodic benefits by life insurance policy proceeds retained within the master trust institution is one truly unique feature of this system; life insurance having prescribed amounts of whole life and progressive one-year term dividend rider components is yet another.
The patent to Durbin et al. (U.S. Pat. No. 4,933,842) provides for an "Automated Investment Fund Accounting System", a computerized investment plan accounting system which manages data for investment plans with multiple participants and multiple investment funds.
The patent to Atkins (U.S. Pat. No. 4,953,085) provides for a "System For The Operation Of A Financial Account". A personal financial management program is disclosed incorporating means of implementing, coordinating, supervising, analyzing, and reporting upon investments in an array of asset accounts and credit facilities within a client account. Through a mathematical programming function, the client specifies his financial objectives, his risk preference, forecast of economic and financial variables, and budgetary constraints. The mathematical programming function suggests to the client a portfolio of investment and credit facilities to best realize his financial objectives over a defined time horizon.
The patent to Halley et al. (U.S. Pat. No. 4,969,094) provides for a self-implementing pension benefits system for subscriber employees (E1, E2, E3 . . . ) including a life insurer institution and a lending institution. A Life insurer trust institution computes and receives each subscriber employee's periodic payment therein to based primarily upon each subscriber employee's age and desired periodic benefits and issuing a life insurance policy covering each subscriber employee (E1, E2, E3 . . . ); providing specific accurate future projections of periodic benefits for retirement, death, or disability; and distributing all life insurance policy proceeds upon the death of each enrolled employee to the lending institution.
The patent to Wolfberg et al. (U.S. Pat. No. 4,994,964) provides a data processing system which monitors a client's business order over time, and based upon predetermined criteria, determines the client's vested interest in funds deposited into special client accounts. The business order data is stored in uniquely formatted client account files. In addition, a vesting account file stores summary data encompassing all the client files.
The patent to Harris et al. (U.S. Pat. No. 5,095,429) provides for a "Method For Prioritizing Data In Financial Information System." A method is disclosed for modifying calculation of predefined procedure in a spread of financial data in a financial information system operative on a digital computer wherein data is manually input into a cell as a value, the value is prioritized above other values dependent thereon by setting a lock flag to indicate that the data is to be secured against change by subsequent recalculation on the cell, and thereafter the data of all other cells which is not locked is recalculated on the basis of the priority values stored in cells designated as locked.
The patent to Fox (U.S. Pat. No. 5,132,899) provides for a "Stock And Cash Portfolio Development System" which combines data gathering and processing methodology with computer apparatus to produce a system whereby a list of stocks and a cash position is generated and purchased for investment and operating accounts.
The patent to Wolfberg et al. (U.S. Pat. No. 5,214,579) provides for a "Goal-Oriented Investment Indexing, Tracking And Monitoring Data Processing System." The data processing system manages, monitors, and reports the growth of a participant's investment base with respect to progress towards achieving a predetermined target amount selected by the participant.
The patent to Bailey (U.S. Pat. No. 5,227,967) provides for a "Security Instrument Data System Without Property Inapplicable Nulls." The patent discloses a system and method for storage and retrieval of investment asset data in a computer system, separates the data into many small files each of limited size and related to a functional attribute of the investment instrument.
Whatever the precise merits, features, and advantages of the above cited references, none of them achieve or fulfills the purposes of the present invention. Accordingly, it is an object of the present invention to provide for a computer-based 401(k) retirement plan which tracks individualized employee participant accounts. It is another object of the present invention to provide a computer-based solution to simplify 401(k) administration. These and other objects are achieved by the detailed description that follows.